Image sensor based terminals are known to be used in industrial data collection applications. For example, image sensor based indicia reading terminals have been used for a number of years for purposes of decoding information encoded in bar code symbols. Commercially available image sensor based terminals can have color image sensors that are capable of taking color pictures. However, the resulting files used to store the colored images can sometimes be large, and can be of varied and sometimes proprietary formats that limit their usability to systems that require proprietary hardware or software to process them. Binary image data structures can be used to represent color, but are limited to only two colors, typically black and white. It would be useful to have a system and method for storing and retrieving color images in binary format, whereby each pixel in the image is represented by a single binary value while retaining the rich color information in the original image, thereby reducing storage space requirements and facilitating processing of that image by legacy systems designed to process binary files.